This paper provides analysis of two‐dimensional radial μ‐law companding quantiser for quantisation and coding of a signal that has Laplacian distribution. Closed‐form expressions are obtained, both for the distortion and the bitrate of an output signal. An approximate expression for the required number of radial levels is also given, as well as an algorithm for computing its exact value. Complete procedure is demonstrated on a few numerical examples, and a comparison is performed with classical scalar μ‐law companding quantiser. It is shown that our model improves maximal SQNR value for 3.5 dB, and has narrower characteristics in a wide range of input signal power. Among many others, the application in the speech coding is described in details.Copyright © 2013 John Wiley & Sons, Ltd.